The next boom in retail. Are we prepared?

With big economies like Europe and China staring at a slowdown, a new world order is beginning to take shape. India, whose growth story is rebounding and poised to accelerate into a higher orbit, is likely to be a winner and emerge as a key economy powering global growth.
India’s retail sector, which is showing signs of maturing after more then ten years of learning, is ranked as the fourth most attractive nation globally for retail investment among 30 growing markets of the world.
The retail market in India (organised + unorganised) is likely to reach a whopping Rs 47 trillion by 2016-17 at the current annual compounded growth rate of 15 per cent, according to a study conducted by YES Bank and Assocham.
Organised retail, which was just 7 per cent of the national GDP in 2011-12, is likely to attain an overall share of 10 per cent + by 2016-17, growing at a CAGR of 24 per cent.
This development itself indicates a major shift happening across the country in terms of a noticeable tilt towards organised retail by the evolved consumers of today. Increasing urbanisation, rising affluence and a growing preference for branded products coupled with new aspirations on account of better reach and exposure to media are among the key factors driving retail consumption across the country.
Another important factor fuelling this growth is the rising demand in Tier 1 & Tier 2 cities and towns, where there is a marked trend toward consumerism. Whilst these are great growth opportunities for organised retail in the country, there exists myriad challenges as well. These have to be tackled and overcome along the way if retail has to become a truly robust and growing sector.
Some of the more urgent challenges relate to the setting up of an efficient supply chain management, cold chain, food safety laws, shortage of skilled manpower, easing of complicated laws and the lack of infrastructure at multiple levels. Resolving these bottlenecks will be critical in determining the pace and path of progress ahead.
Reskilling of the manpower and development of the required infra are priority areas that call for immediate attention at various levels of governance – organisational, political, and administrative. The key sectors likely to drive the retail boom are food and grocery, apparel, lifestyle and electronics besides of course e-commerce.
In the current scenario, consumer spend on food & grocery is estimated to be around 58 per cent of an average household expense.
With the change in lifestyle, this share will continue to grow owing to the shift toward modern and processed foods and out-of-home food consumption.
Apart from food, consumer spending will also expand in other consumption areas as identified above i.e. apparel, electronics, etc. In order to exploit and capitalise on this trend of greater consumer indulgence, retailers need to draw up a focused approach with clear objectives to firm up the road map for tapping into the changing shifts in consumer preferences and habits.
The good news is that the ongoing consolidation of the retail sector in last few years has prepared the sector for the taking on the challenges ahead. After struggling for a few years to remain financially viable and eke out a profit, major retail chains have now managed to climb out of the trough and turn a corner.
A few have in fact managed to turn past losses into a tidy profit, an achievement that comes as a shot in the arm for the entire retail sector. With things beginning to look up, most of the key players have firmed up their expansion plans across the country. I am sure that the days ahead will witness major roll-outs by players, which will surely act as a big booster for the economy at large. While such investments are welcome and very reassuring, retailers should go about their spending spree with due diligence to the health of their bottom lines.
Achey Din for retail seems to be finally around the corner, so let’s seize this opportunity with both hands.